Europe is creating a thriving e-business environment by driving broadband growth and investing in public and private Internet initiatives, according to a report released Wednesday.

The Economist Intelligence Unit (EIU) released its sixth annual ranking of the "e-readiness" of 65 countries, rating them on factors such as Internet access, mobile penetration, innovation and investment.

Seven of the countries in the top ten are in Europe, with Denmark ranked number one thanks to its high rate of connectivity and solid technical infrastructure, the EIU said. Other European front-runners were Sweden at number three, followed by Switzerland, and the U.K. Finland tied with Hong Kong in sixth place, and they were followed by the Netherlands and Norway.

Strong e-government initiatives and broadband development helped boost the European contenders, according to Denis McCauley, director of global technology research at the EIU.

Switzerland moved up from its tenth-place spot in 2004 thanks to Internet growth and a strong education base, McCauley said. The EIU revised its criteria for the rankings this year, adding more weight to broadband penetration and average years of schooling, thus improving Switzerland's score, McCauley said.

The U.S. took number two, advancing from its sixth-place position last year, because of broadband and mobile connectivity progress, McCauley said. The nation also continued to score high in the areas of entrepreneurship and e-business services, he said.

Hong Kong led the Asia-Pacific contenders at number six, followed by Singapore at 11 and South Korea at 18. The development of e-business services and a positive legal and policy environment helped boost Hong Kong, the EIU said. While South Korea remains the most developed broadband market in the world, factors such as Internet security counted against it, the researcher said.

China and India, well known for their IT growth, came in near the bottom of the chart, EIU said. China stood at 54 in the rankings while India came in at 49.

Looking ahead, McCauley predicted that new E.U. members Estonia and Slovenia, currently at numbers 26 and 27 respectively, would continue to make gains based on the amount of public and private funding going into their Internet development. He also predicted that South Korea would make a quick comeback in nontechnical areas like policy and education.

The EIU e-readiness report reviews over 100 criteria in categories such as supporting e-services, legal and policy environments and technical infrastructure.